Too Bad It's Not in the "Restructuring" Business

My fellow Fool Jim Mueller pretty much nailed it a few months back, when he called Boston Scientific (NYSE: BSX  ) anything but a value stock. Shares slipped nearly 10% yesterday, after the company released earnings and guidance for this year.

The problem? Boston Scientific's turnaround seems likely to take even longer than expected. The company is restructuring. Again. Unfortunately for shareholders, it's been doing so for some toddlers' entire lives.

Metric

2007

2008

2009

2010 Guidance

Pre-tax Restructuring Charges (in millions)

$184

$133

$130

$180-$200

Source: Company press releases.

Adding Guidant was supposed to help Boston Scientific increase the diversity of its products away from drug-eluting stents. Boston Scientific could see its U.S. duopoly with Johnson & Johnson (NYSE: JNJ  ) coming to a close, as Medtronic (NYSE: MDT  ) and Guidant, whose stent business went partially to Abbott Labs (NYSE: ABT  ) , developed drug-eluting stents of their own.

But the addition of Guidant's cardiac rhythm management (CRM) business seems to have resulted in an unwieldy company, forced to constantly adjust to the ever-changing medical device market. This year's cuts will shrink Boston Scientific's workforce by 8% to 10%.

Adding insult to injury, the company let go several CRM sales reps for disciplinary reasons that the company didn't disclose. Some of those reps have headed to competitor St. Jude Medical (NYSE: STJ  ) . The exodus is expected to hurt sales this year.

Boston Scientific was clearly not a good buy before the earnings announcement, but has it become a value play after the drop? I don't think so. It still seems like a value trap to me.

The company thinks it'll have positive GAAP earnings this year for the first time in many years, but even on an adjusted basis, management is only expecting earnings of $0.62 to $0.72 per share. At the low end, that's still a forward P/E of 12 -- way too generous for a company that has yet to prove it can turn restructuring charges into meaningful returns.

Johnson & Johnson is a Motley Fool Income Investor pick, and Motley Fool Options has recommended buying calls on Johnson & Johnson. The Fool owns shares of and has written puts on Medtronic. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1111284, ~/Articles/ArticleHandler.aspx, 4/16/2014 1:12:03 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 3 hours ago Sponsored by:
DOW 16,262.56 89.32 0.55%
S&P 500 1,842.98 12.37 0.68%
NASD 4,034.16 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/15/2014 4:00 PM
BSX $13.35 Up +0.04 +0.30%
Boston Scientific… CAPS Rating: ***
ABT $37.97 Up +0.23 +0.61%
Abbott Laboratorie… CAPS Rating: *****
JNJ $99.20 Up +2.06 +2.12%
Johnson & Johnson CAPS Rating: ****
MDT $58.05 Down -0.03 -0.05%
Medtronic, Inc. CAPS Rating: *****
STJ $63.22 Up +0.67 +1.07%
St. Jude Medical,… CAPS Rating: ****

Advertisement